Tory axe blights FSA jobs

The Financial Services Authority could face a recruitment crisis next year with the Conservatives pledging to scrap it if they win the General Election.

Cameron: The Conservative leader wants to return power to Bank of England.

FSA insiders fear it will become increasingly difficult to lure City talent after Shadow Chancellor George Osborne said he would return the job of banking supervision to the Bank of England and break up the regulator.

The FSA has hired an extra 300 staff for supervisory operations in the past year to monitor financial companies, taking the number of supervisors to about 700 and total staff to almost 3,000.

The FSA refused to comment on recruitment or salaries, though its annual report for 2008 showed total staff costs at about £250m, or an average about £100,000 for each employee.

While staff numbers have climbed, the workload of the regulator has also ballooned because of the financial crisis and the FSA's role in overhauling the banks.

The Asset Protection Scheme under which Lloyds Banking Group and Royal Bank of Scotland may insure up to £560bn worth of toxic assets has tied up scores of staff since February.

The APS requires the banks to pay an insurance premium to the Government. In Lloyds' case, its original plan would require it to pay £15.6bn to the Treasury in shares.

The bank is trying to reduce that bill or even avoid using the APS altogether. To do so it must raise £25bn from disposals and a possible share issue and still pay a break fee of between £1bn and £2bn.

The FSA is testing the original APS plan and Lloyds' alternative efforts to judge whether they would leave the banks with enough capital to avoid further financial jolts.